TD Cowen on Microsoft

Avatar photo Chris Versace on October 15, 2026

TD analyst Derrick Wood said the following on $MSFT today: 

Datacenter capacity growth supports our estimated 35% Azure revenue CAGR through FY31. We model capacity rising from ~11.5 GW in FY26 to ~36.6 GW in FY31, adding about 16 GW of GPU capacity and 9 GW of CPU capacity. 

We think Azure revenue reaches $461B as AI becomes most of the business. We forecast Azure revenue increasing from $102B in FY26 to $461B in FY31. AI revenue is expected to grow at a 60% CAGR to $284B, lifting its share of Azure revenue from 27% to 62%. 

Our GPU monetization assumptions leave room for upside. Annualized revenue per new GPU GW rises in our model from about $14B to $22.5B.

We expect Capex rises but free cash flow remains positive. Capex increases from $145B in FY26 to $333B in FY31. Our model shows FCF margin troughing at 7% in FY27 and recovering to ~25% in FY31 as growth outpaces incremental spending. Execution and compute allocation remain key risks. Power and hardware constraints, permitting delays, changes to the OpenAI partnership, and greater investment in frontier models could affect capacity timing, Azure growth, and capex. The model assumes about 70% of GPU capacity serves Azure.” TD Cowen reiterates Buy with a $625 price target.

Position: TheStreet Pro is long MSFT

Back in Action and Eyeing Producer Prices

Avatar photo Chris Versace on October 15, 2026

Apologies for briefly stepping away but I had to get to today’s 8 Things Moving the Market Today, which should be out shortly. 

In response to the hotter-than-the-market-expected September producer price index (and thanks to Neil “the Facts” Sethi for covering it in more detail in the Comment section below), I will share a “as I suspected” moment:

From yesterday:

Here’s the thing: If we follow the September PMI data from ISM and S&P Global, odds are it means we will see another step up in the September Producer Price Index data due on Thursday. Walking into Wednesday’s September CPI data, the market consensus called for flat to down figures headline and core PPI for September:

September PPI: 5.3% year over year versus 5.4% in August

September core PPI: 4.4% versus 4.6% in August

As we pointed out in our opening comments on Thursday morning, core PPI has been running over 4% on a year-over-year basis since April. With that trend at least continuing in September and likely heating up further during the month, barring any collapse in oil and related energy prices, inflation pressures will continue to ripple through the economy, especially as companies look to protect margins where they can.

On that September retail sales report, which saw spending accelerate across multiple categories even after we strip out that 28% year over year jump in gasoline station retail sales, it provides a very nice yardstick by which to measure upcoming retail facing earnings with its 5.4% year over year increase for Retail only sales in Q3 2026. 

And yes, in my view sizing up the September retail sales report and factoring in the lessons in the September consumer price index and PPI reports, I continue to see Costco ($COST) taking consumer wallet share as we head into the year-end holiday season. 

Position: TheStreet Pro is long COST. 

Upgrades, Downgrades and New Research Coverage

Avatar photo Chris Versace on October 15, 2026

Upgrades:

ArcelorMittal ($MT) upgraded to Overweight from Neutral at JPMorgan

Array Technologies ($ARRY) upgraded to Outperform from Neutral at Mizuho, Target: $5

Bank of America ($BAC) upgraded to Outperform from Neutral at Baird, Target: $62

BorgWarner ($BWA) upgraded to Buy from Neutral at BofA, Target: $85

Brighthouse Financial ($BHF) upgraded to Neutral from Underweight at JPMorgan, Target: $55

CarMax ($KMX) upgraded to Buy from Underperform at BofA, Target: $65

Casey’s General Stores ($CASY) upgraded to Outperform from Sector Perform at RBC Capital, Target: $825

Cemex ($CX) upgraded to Buy from Neutral at Citi, Target: $12

Crocs ($CROX) upgraded to Overweight from Equal Weight at Barclays, Target: $139

Fortrea ($FTRE) upgraded to Buy from Hold at Deutsche Bank, Target: $25

Lithium Americas ($LAC) upgraded to Speculative Buy from Hold at Canaccord

Quantinuum ($QNT) upgraded to Overweight from Equal Weight at Morgan Stanley, Target: $62

Scotts Miracle-Gro ($SMG) upgraded to Buy from Neutral at UBS, Target: $70

Walmart ($WMT) upgraded to Buy from Hold at Deutsche Bank, Target: $136

Zions Bancorp ($ZION) upgraded to Outperform from Neutral at Baird, Target: $75

Downgrades:

Albertsons ($ACI) downgraded to Neutral from Overweight at JPMorgan, Target: $14

Albertsons ($ACI) downgraded to Neutral from Buy at Goldman Sachs, Target: $13

Align Technology ($ALGN) downgraded to Neutral from Outperform at Baird, Target: $162

Cirrus Logic ($CRUS) downgraded to Sector Weight from Overweight at KeyBanc

Dauch ($DCH) downgraded to Underperform from Buy at BofA, Target: $5

Envista ($NVST) downgraded to Neutral from Outperform at Baird, Target: $26

Par Pacific ($PARR) downgraded to Neutral from Buy at Goldman Sachs, Target: $94

Spotify ($SPOT) downgraded to Hold from Buy at StoneX

ZTO Express ($ZTO) downgraded to Neutral from Buy at Goldman Sachs, Target: $22

New research coverage

AngloGold Ashanti ($AU) initiated with a Buy at Goldman Sachs, Target: $104

Antero Resources ($AR) initiated with a Sector Outperform at Scotiabank, Target: $46

APA Corp. ($APA) initiated with a Sector Perform at Scotiabank, Target: $44

Black Hills ($BKH) initiated with a Buy at Jefferies, Target: $87

Bright Minds Biosciences ($DRUG) initiated with an Outperform at Wolfe Research, Target: $150

CAMP4 Therapeutics ($CAMP) initiated with a Buy at Needham, Target: $8

Chord Energy ($CHRD) initiated with a Sector Outperform at Scotiabank, Target: $192

CNX Resources (CNX) initiated with a Sector Perform at Scotiabank, Target: $34

Crescent Energy ($CRGY) initiated with a Sector Outperform at Scotiabank, Target: $18

CRISPR Therapeutics ($CRSP) initiated with a Neutral at UBS, Target: $52

Devon Energy ($DVN) initiated with a Sector Outperform at Scotiabank, Target: $61

Diamondback Energy ($FANG) initiated with a Sector Outperform at Scotiabank, Target: $250

Digital Turbine ($APPS) resumed with a Buy at Roth Capital, Target: $19

Eloxx Pharmaceuticals ($ELOX) initiated with an Overweight at Cantor Fitzgerald

EOG Resources ($EOG) initiated with a Sector Perform at Scotiabank, Target: $144

EQT Corporation ($EQT) initiated with a Sector Perform at Scotiabank, Target: $54

Establishment Labs ($ESTA) initiated with a Buy at Stifel, Target: $85

Fidelity National Information Services ($FIS) resumed with a Buy at BofA, Target: $42

First Financial Bankshares ($FFIN) initiated with a Market Perform at Raymond James

Fiserv ($FISV) resumed with an Underperform at BofA, Target: $48

Global Payments ($GPN) resumed with a Buy at BofA, Target: $114

Gold Fields ($GFI) initiated with a Neutral at Goldman Sachs, Target: $38

Gulfport Energy ($GPOR) initiated with a Sector Outperform at Scotiabank, Target: $217

HawkEye 360 ($HAWK) initiated with an Overweight at Piper Sandler, Target: $22

Hemab Therapeutics ($COAG) initiated with an Overweight at JPMorgan, Target: $70

Infinity Natural Resources ($INR) initiated with a Sector Outperform at Scotiabank, Target: $17

Magnolia Oil & Gas ($MGY) initiated with a Sector Outperform at Scotiabank, Target: $31

Matador Resources ($MTDR) initiated with a Sector Perform at Scotiabank, Target: $59

MGE Energy ($MGEE) initiated with a Neutral at JPMorgan, Target: $76

Murphy Oil ($MUR) initiated with a Sector Perform at Scotiabank, Target: $41

Netflix ($NFLX) assumed with a Buy at Jefferies, Target: $85

Northern Oil and Gas ($NOG) initiated with a Sector Perform at Scotiabank, Target: $27

onsemi ($ON) initiated with a Buy at StoneX, Target: $110

Ovid Therapeutics ($OVID) initiated with an Outperform at Wolfe Research, Target: $5

Permian Resources ($PR) initiated with a Sector Outperform at Scotiabank, Target: $29

Rapport Therapeutics ($RAPP) initiated with an Outperform at Wolfe Research, Target: $50

Rapport Therapeutics ($RAPP) initiated with a Buy at UBS, Target: $71

Redwire ($RDW) initiated with a Neutral at Piper Sandler, Target: $11

Shift4 Payments ($FOUR) resumed with a Neutral at BofA, Target: $42

Sight Sciences ($SGHT) initiated with a Buy at H.C. Wainwright, Target: $14

SM Energy ($SM) initiated with a Sector Perform at Scotiabank, Target: $39

Solid Biosciences ($SLDB) initiated with a Buy at UBS, Target: $20

Spectrum Brands ($SPB) resumed with a Buy at UBS, Target: $97

Suja Life ($SUJA) initiated with a Hold at Needham

Ultragenyx ($RARE) initiated with a Neutral at UBS, Target: $16

Vail Resorts ($MTN) initiated with a Market Perform at Citizens

Versant Media ($VSNT) initiated with an Equal Weight at Morgan Stanley, Target: $38

Viking Therapeutics ($VKTX) initiated with a Buy at UBS, Target: $94

Viper Energy ($VNOM) initiated with a Sector Outperform at Scotiabank, Target: $54

Warner Music Group ($WMG) initiated with a Buy at StoneX

Wave Life Sciences ($WVE) initiated with a Buy at UBS, Target: $11

York Space Systems ($YSS) initiated with a Neutral at Piper Sandler, Target: $9

Position: TheStreet Pro Portfolio is long BAC, NFLX 

‘Defeat Is a State of Mind’

Avatar photo Chris Versace on October 15, 2026

“Defeat is a state of mind. No one is ever defeated until defeat has been accepted as a reality.”

– Bruce Lee

Some top congressional Republicans have privately concluded that it is likely impossible for them to keep control of the House of Representatives in the midterm elections, and they are now focused on limiting the scale of the defeat and salvaging the party’s Senate majority.

I’ll spare you the politics and just say, more on this can be found here over at Politico.

Position: None

Beyond Belief

Avatar photo Chris Versace on October 15, 2026

Another sign of an increasingly crowded energy drink market, and of a desperate company in Beyond Meat ($BYND):

Beyond Meat entered the energy-drink category with Beyond Immerse Protein + Energy, a sparkling plant-based protein drink with 160mg of caffeine per serving.

The new product launches exclusively on BeyondPlantProtein.com in Cherry Berry and Watermelon Strawberry flavors.

More here

Position: None

Higher Prices on the Menu

Avatar photo Chris Versace on October 15, 2026

Collecting data points is pretty much a full-time business, and this morning I’m reading an article in NRN (Nation’s Restaurant News) and it has some interest stats ahead of today’s September Retail Sales report and quarterly results from restaurant companies in the next few weeks:

Restaurant menu price inflation continues to increase at a rate well over that of grocery stores but even more when compared with the amount of money Americans are actually earning…

The gap in prices compared with wages helps explain weak consumer sentiment, which declined 13.6% year over year in October, according to the Survey of Consumers at the University of Michigan.

It is also putting more pressure on restaurant chains that are contending with ongoing declines in customer traffic.

Quick-service restaurant sales were up just 0.6% in the third quarter, according to the data firm Revenue Management Solutions. Traffic during the period declined 2.6%.

The full NRN article can be found here.

Position: None